Closing summary
Time for a recap.
Boris Johnson has admitted that the government’s latest cost of living package won’t fully protect people from surging prices.
Speaking a day after Rishi Sunak unveiled £15bn of support, in response to the energy crisis, the PM said:
I’m not going to pretend that this is going to fix everything for everybody immediately. There are still going to be pressures.
But it’s a very, very substantial commitment by the government to getting us through what will be, I’m afraid, still a bumpy time with the increase in energy prices around the world.
Johnson also defended handing every household a £400 energy rebate, regardless of their circumstances, saying it was “massively, massively redistributive”.
In an interview with Bloomberg, Johnson took the upbeat view that the UK was not necessarily heading into recession.
But Johnson declined the chance to pledge to pay £400 to charity, as chancellor Rishi Sunak did, on the grounds that he lives in a government flat.
Sunak said that people who didn’t need the rebate should give the money to charity, as he will – insisting that a universal payment was the best way to ensure that those in need were protected.
He told Sky:
“You, like me, can also give that money to charity if you don’t need it.
Labour criticised the goverment for allowing second-home owners to get two £400 rebates, saying this showed the plan had been rushed out to distract from the Sue Gray report into Partygate.
Sunak also argued that his plan won’t have much impact on inflation, already at 40-year highs of 9%, and insisted he was still a “fiscal conservative” despite announcing plans that will require £10bn of extra borrowing.
The Institute for Fiscal Studies said Sunak was “engaging in some serious redistribution from rich to poor”:
The poorest households will now be approximately compensated for the rising cost of living. Many low earners will now be better off this year than last. High earners will still tend to be worse off.
But the Resolution Foundation pointed out that wealthy pensioners were the big winners, while families with several children might feel “rough justice” from the flat-rate rebate as their higher energy usage isn’t recognised.
Resolution Foundation:
— Steven Swinford (@Steven_Swinford) May 27, 2022
* 9.5% uprating of state pension & benefits is *biggest for 32 years* and will cost £15bn
* Sunak's package will shield average households from 82% of bill rises;, 93% for poorest
* Biggest losers = large families; biggest winners = wealthy pensioners
The CEBR warned that yet more help will be needed next year, if energy prices - driven high by the Ukraine war - don’t come down.
Deutsche Bank said the package would only have a modest boost to growth, but probably enough to avoid recession.
The bad news for borrowers, though, is that it may spur the Bank of England on to raise interest rates faster, warned Capital Economics.
Shares in oil producers fell as the City digested the windfall tax, while electricity producers weakened after Sunak hinted they would face a levy too.
Shell criticised Rishi Sunak’s windfall tax, saying it was a threat to investment in North Sea oil and gas as Britain attempts to ramp up domestic energy supplies.
Our Politics Live blog has the latest action, including the resignation of Conservative MP Paul Holmes as a parliamentary private secretary in response to the revelations in the Sue Gray report.
Updated
Shell: windfall tax is threat to investment
Shell has said Rishi Sunak’s windfall tax is a threat to investment in North Sea oil and gas as Britain attempts to ramp up domestic energy supplies.
A Shell spokesperson said:
We understand the worry for millions of people about how high energy costs are challenging their household budgets – and the need for support to help make ends meet.
But at the same time, we must sustain investment in securing supplies of oil and gas the UK needs today, while allocating future spend for the low carbon energies we want to build for the future.
However, in its current form the levy creates uncertainty about the investment climate for North Sea oil and gas for the coming years.
And, longer term, the proposed tax reliefs for investment don’t extend to the renewable energy system we want to drive forward in the UK and invest in very substantially. When making plans for the next decade and beyond, we need certainty.
Shell has been studying the new oil and gas windfall tax some more… and it’s not happy
— Emily Gosden (@emilygosden) May 27, 2022
New statement says the levy “creates uncertainty” for North Sea investment and fails to encourage its plans to invest in renewables… pic.twitter.com/Bz8aQ0LyKm
Shell plans to make £20bn to £25bn of investments in the UK over the next decade, predominantly in renewable energy projects.
Industry insiders were surprised that the one-off levy will remain in place until “normal” conditions in the energy market return or until the end of December 2025.
Updated
